Balanced Portfolio with Strong US Equity Focus and Moderate Risk for Canadian Investor

Report created on Nov 24, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio consists primarily of ETFs, with a strong emphasis on the Vanguard S&P 500 Index ETF, which represents 70% of the total holdings. This ETF provides broad exposure to large-cap US equities, a staple for many investors seeking growth. Additionally, the portfolio includes Canadian equities through the Vanguard FTSE Canada All Cap ETF and international exposure via the iShares Core MSCI EAFE IMI ETF. A small allocation to the Purpose Bitcoin ETF adds an element of alternative investment. This composition suggests a balanced approach with a moderate risk profile, suitable for long-term growth.

Growth Info

Historically, the portfolio has shown a commendable CAGR of 15.12%, reflecting strong performance over time. However, it experienced a maximum drawdown of -21.31%, indicating exposure to market volatility. The 25 days that make up 90% of returns highlight its reliance on key market movements. This performance suggests an ability to capitalize on market upswings, although it's subject to downturns. Investors should be aware of this volatility and ensure it aligns with their risk tolerance. Maintaining a long-term perspective can help mitigate the impact of short-term fluctuations.

Projection Info

Using a Monte Carlo simulation, the portfolio's future performance was projected with a hypothetical initial investment. The simulation ran 1,000 scenarios, showing a range of possible outcomes. The median scenario suggests a 504.27% return, while the 67th percentile forecasts a 933.25% return. The 5th percentile, however, indicates a potential loss of -14.37%. With 936 simulations yielding positive returns, the annualized return across all scenarios is 18.78%. This analysis underscores the portfolio's potential for substantial growth, albeit with inherent risks, and emphasizes the importance of staying invested.

Asset classes Info

  • US Equity
    70%
  • Stocks
    13%

The portfolio is predominantly allocated to US equities, accounting for 69.65% of the total. Additional equity exposure comes from Canadian and international markets, with minimal allocations to cash and other asset classes. This concentration in equities suggests a growth-oriented strategy, which can offer higher returns over the long term but also increases exposure to market volatility. Diversifying further into other asset classes, such as fixed income, could help mitigate risk and provide more stability during market downturns.

Sectors Info

  • Technology
    26%
  • Financials
    16%
  • Health Care
    9%
  • Industrials
    9%
  • Consumer Discretionary
    9%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    5%
  • Basic Materials
    4%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation reveals a significant concentration in technology at 25.5%, followed by financial services and healthcare. This distribution reflects a focus on sectors with strong growth potential, though it also implies vulnerability to sector-specific risks. While technology and financial services have been strong performers, they can be volatile. Balancing sector exposure by increasing allocations to more defensive sectors, like consumer staples or utilities, could enhance stability and reduce risk. This approach ensures that the portfolio is not overly reliant on any single sector's performance.

Regions Info

  • North America
    83%
  • Europe Developed
    8%
  • Japan
    3%
  • Australasia
    1%

Geographically, the portfolio is heavily weighted towards North America, with 82.65% of assets allocated there. This focus provides exposure to the robust US and Canadian markets but limits diversification across other global regions. While North America has historically been a strong performer, expanding exposure to emerging markets or other developed regions could capture growth opportunities and reduce regional risk. A more geographically diversified portfolio can better withstand localized economic downturns and benefit from global economic growth.

Risk vs. return

This chart shows the Efficient Frontier, calculated using your current assets with different allocation combinations. It highlights the best balance between risk and return based on historical data. "Efficient" portfolios maximize returns for a given risk or minimize risk for a given return. Portfolios below the curve are less efficient. This is informational and not a recommendation to buy or sell any assets.

Click on the colored dots to explore allocations.

Portfolio optimization suggests room for improvement in balancing risk and return. By moving along the efficient frontier, investors can adjust their risk exposure. To pursue higher returns, one might increase equity exposure, accepting higher volatility. Conversely, to reduce risk, incorporating more fixed income or diversifying into low-correlation assets can be beneficial. It's crucial to align these adjustments with personal risk tolerance and financial goals. Optimizing the portfolio involves considering both current market conditions and long-term objectives, ensuring a well-rounded investment strategy.

Dividends Info

  • Vanguard FTSE Canada All Cap 2.50%
  • Vanguard S&P 500 Index ETF 1.00%
  • iShares Core MSCI EAFE IMI 2.60%
  • Weighted yield (per year) 1.36%

The portfolio's dividend yield stands at 1.36%, with contributions from the Vanguard FTSE Canada All Cap, Vanguard S&P 500 Index ETF, and iShares Core MSCI EAFE IMI. This yield provides a modest income stream, which can be reinvested for compounding growth. While not the primary focus, dividends offer stability and can help offset market downturns. Investors seeking higher income might consider increasing exposure to dividend-focused assets. However, it's essential to balance income generation with capital appreciation to achieve overall financial goals.

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